How does Emera afford to put its name on our skating oval?
It doesn't You do. One way or the other...
Solidarity Halifax’s quixotic campaign to rename the Commons skating oval isn’t likely to find many takers among cash-starved city councilors, but it should give the rest of us pause.
How is it that Emera, the parent company of Nova Scotia Power, the private utility that keeps applying to jack up our electricity rates, not only has enough spare cash to reward its million-dollar-a-year executives with top-up performance bonuses—in no small measure for convincing regulators to jack up our electricity rates to keep shareholder returns high—but also still has sufficient leftover scraps to contribute “generously” to public recreation complexes in exchange for rights to name those mostly-publicly-financed facilities after itself?
In 2011, Halifax city council traded Emera naming rights to the new Commons skating oval for the next 10 years for $500,000.
Think about it. The rink cost taxpayers $5.7 million to build, plus another $400,000 a year to maintain. But for $50,000 a year, Emera gets to name the venue after itself, thereby claiming credit for its existence.
Or Consider Queen’s Place Emera Centre in Liverpool. For another $500,000, the company got to slap its corporate face on the front of a community recreation complex that cost federal taxpayers $7 million, provincial taxpayers $5 million and local governments $4 million in capital reserves.
Queen’s Place Emera Centre?
And then there’s the space formerly known as the Northside Community Civic Centre in North Sydney. For a measly $350,000, Emera got to name that otherwise $22-million publicly-funded facility Emera Centre Northside.
One can’t blame financially strapped communities for prostrating themselves before the chintzy gods of corporate givers. But one can ask why corporations, especially regulated monopoly profit centres, have so much cash on hand they can dangle it, like lollipops, for branding purposes.
Could it be because corporations no longer pay their fair share of taxes, which gives these corporate “donors” inordinate power over what should be community funding—and naming—recreation, arts and culture decisions.
Though it won’t change reality, you can at least express your unhappiness by voting for a new, improved non-corporate name for our oval from a short list at solidarityhalifax.ca. Voting concludes Mar. 7.
Copyright 2013 Stephen Kimber
No success like failure… Rob Bennett and NSP
One of the enduring myths among those who bow down to the gods of the marketplace is that someone who screws up in the private sector—unlike the cosseted public sphere—will suffer inevitable, inevitably dire consequences for failure.
While there may be truth to that at the lower rungs of the corporate ladder, those at the top seem well insulated from the rigors of marketplace discipline.
Case in point: Rob Bennett, until last week the president and chief operating officer of Nova Scotia Power, 2011 salary circa $1.15 million, up 23 per cent from the year before…
Last month, the Nova Scotia Utilities Review Board issued its decision on NSP’s latest rate increase request. While granting three per cent increases in 2013 and 2014, the board tore a strip off Nova Scotia Power management, which is to say Bennett.
It disallowed $4.5 million in fuel costs the company had claimed in 2010 and 2011, arguing NSP could have purchased fuel more cheaply.
And it expressed its “dismay and concern” over the company’s “unreasonable… inappropriate… inexplicable… inexcusable” conduct during the hearings. After spending $2 million to hire 10 experts and filing over 1,000 pages of evidence to attack an independent auditor’s conclusions, the company—on the very last day of the hearings—revealed important information about its fuel market dealings, which, the board noted, added “significant time, cost and rancor, unnecessarily” to the proceedings.
The URB fined NSP $2 million for bad behavior.
Let’s see… Two-million to unsuccessfully contest the audit, $2 million for conduct unbecoming and $4.5 million more to cover disallowed fuel costs. That’s $8.5 million.
And don’t forget that during Bennett’s four-year watch, a $93-million heat recovery project went 40 per cent over budget and the company had to swallow more costs because of delays in moving into its new corporate headquarters.
Did Bennett walk the plank for his transgressions? Fall on his sword in shame?
Not exactly. Last week, Emera, NSP’s parent company, announced Bennett would become its executive vice president and chief operating officer, a job that didn’t exist before it was created coincidentally just in time for Bennett’s soft landing.
Ah, yes, the private sector. Where the consequences of failure are… success.
Copyright 2013 Stephen Kimber
Emera salary increases: some questions, some answers
The news that senior executives at Emera and its wholly owned, profit-protected subsidiary, Nova Scotia Power, topped their million-plus, one-per-center-club-members-in-good-standing pay packets with raises from 20 to 30 per cent last year prompts all sorts of intriguing questions.
For starters, how many of the company’s secretaries sat on the compensation committee? The short answer: none.
And how many of Emera’s little old lady shareholders clutching their 10-share legacies for their grandchildren were invited to weigh in this larcenous largesse? Ditto.
Given the usual corporate-speak, soft-shoe routine about how such increases—Emera president and CEO Chris Huskilson now tops $2.99 million, executive vice president Nancy Tower $1.4 million and Nova Scotia Power president and CEO Rob Bennett $1.15 million—simply reflect company performance, how likely is it that Emera’s 35 per cent drop in profits so far this year will show up in next year’s executive take home pay?
If you think it will, I have a Muskrat Falls hydroelectric project for sale cheap.
And, since the company’s board of directors obviously believes its top executives are worth dramatic pay increases, will it offer similar 20-30 per cent increases to its unionized work force when the next contract is up for renewal? Or will it tout the flip-side arguments: increasing fuel costs, the need for new capital investment, the general state of the real-world work economy to low-ball its waged workers. Two guesses. The first doesn’t count.
There are other questions too. How much better would Nova Scotia Power’s salt-fog, stiff-breeze, power’s-out-again response time be if it invested in hiring more linemen instead of underwriting the summer homes and sailboats of its top executives?
And one more, larger question. Why did Donald Cameron’s short-lived Tory government peddle Nova Scotia Power, then a successfully publicly-owned and operated public utility—to the private sector back in 1992.
The ostensible reason was to pay down public debt.
Our debt is higher now, and still rising.
And we no longer have a public utility that takes into account the public interest. Perhaps that was the real purpose.
Copyright 2012 Stephen Kimber
Nova Scotia budget: the cost of cutting v the value of investing
In the all-too-brief interregnum between Thursday’s bad-news federal budget and tomorrow’s more-bad-news provincial budget, it’s worth noting the across-the-board, cost-cutting Kool Aid fiscal policy makers in Ottawa and Halifax have swallowed is not the only—or necessarily best—way to slay the deficit dragon.
The Nova Scotia branch of the Canadian Centre for Policy Alternatives, for example, a progressive think tank, recently released its annual alternative provincial budget. Its “Forward to Fairness” document calls for “strategic investments” while finding “creative ways to save money and increase revenue.” Instead of rushing to balance the budget in 2013-14 “to fit the timing of the electoral cycle,” the CCPA wants the government to stretch the back-to-balance timetable to 2015-16 to “reflect the actual fiscal situation.”
“Austerity does not come for free,” says the CCPA’s Nova Scotia director, Christine Saulnier. The CCPA says the government’s decision to cut $772 million in public spending over four years will mean the loss of “well over 10,000 jobs.”
By contrast, the CCPA’s approach involves investing $492.5 million in social infrastructure and programs, including everything from $40 million to establish 10 new community health centres, fund 10 more nurse practitioners and 12 more midwives, to $45 million to phase in an early learning and child care system and $21 million for rural public transit.
Where would the money come from to pay for all of this. Primarily by shifting the tax burden, says the CCPA, from low and middle-income taxpayers “to the upper 45 per cent of income earners, especially the top 10 per cent,” those who have gained the most in the past decade.
Graham Steele
Don’t expect to hear any of this on Tuesday. While the CCPA had what Saulnier calls “a serious and engaged exchange” with Finance Minister Graham Steeele, the finance department “has framed the problem and the solutions in a way that precludes our proposals. In other words, they see declining enrollment in P-12 as a way to justify cutting; we see it as an opportunity to finally catch up with the rest of Canada and begin to really address quality.”
Pity.
Copyright 2012 Stephen Kimber
John Risley responds to my Occupy column
John Risley, the president of Clearwater Fine Foods and a columnist for Atlantic Business Magazine, says I've got it all wrong when it comes to the Occupy Movement.
"In the previous issue of Atlantic Business Magazine," Risley writes, "my fellow columnist — Stephen Kimber — attempted to explain the Occupy movement. Unfortunately he got it all wrong. Rather, he completely missed the point, as do most ‘occupiers’ I suspect..."
You can read both my original column, "The Occupy Movement for business... in 15 minutes, more or less," here, and Risley's reponsse, "Missing the Mark," there.
Copyright 2012 Stephen Kimber
The rise and fall—and fall—of Richard Homburg
By 2009, Richard Homburg’s glitzy, buzz-worthy annual office parties had become corporate Halifax’s post-Christmas social hot ticket. Two hundred of the city’s elite investors, investment advisors, developers, lawyers, accountants and assorted corporate hangers-on would gather in the January freeze to mix and mingle at Homburg Citadel, Homburg Invest’s global corporate headquarters. A modern building insinuated into the base of Citadel Hill in the shadow of Halifax’s Town Clock, it has a commanding a view of the downtown banking and financial towers.
“Anyone who was anyone would be there,” recalls Kevin Cox, the then-managing editor and investment columnist at allnovascotia.com, a business web site, who was one of the few journalists to score an invitation. While the catered canapés and well-chosen wines may have been “marvelous,” Cox was more interested in the events’ journalistic possibilities. The receptions usually capped a Homburg Invest board meeting, “and there was always the sense of big things happening.”
The highlight of the evening was invariably Richard Homburg’s… “Ah, I’m not quite sure how to describe them,” admits an investment advisor who was also a regular at the soirées. “I called them Richard Homburg’s ‘state-of-the-world’ speeches.”
After about an hour of socializing, Homburg would take to the microphone and pontificate for anywhere from half an hour to an hour: about governments — local, national, international — about global politics, world economics, interest rates, the investment climate, Asia, Europe, the future... His own publicly traded company was often little more than an aside in these ramblings, but he was always worth listening to, says the investment advisor, “because he wasn’t your typical corporate CEO. He was eccentric and he would say outlandish things.”
And because Richard Homburg was also incredibly successful — a self-made immigrant entrepreneur who headed a $4-billion, Halifax-based global real estate company with assets in Canada, the United States and Europe — people paid attention.
“He wasn’t a name dropper,” adds Cox, “but there was a depth of knowledge and he gave the sense that I know this from the inside. ‘When I was in Austria… When I was in Germany…’ He was very much a world citizen.”
No wonder then that Homburg’s January 2009 ‘state-of-the-world’ address was so eagerly anticipated.
In 2008, the world had gone straight to hell on a runaway train filled with corporate collapses, bank bailouts and murky financial finagling. It was the worst financial crisis since the Great Depression, and many traced the knocked-down dominoes of major banks, investment houses, financial institutions and economies to the gigantic whoosh from the belatedly pricked balloon of an insanely out-of-control real estate market.
Real estate, of course, was Richard Homburg’s life. His own businesses had been far from immune to the economic meltdown. Just two months before, Homburg Invest had announced it was pulling out of a $128-million joint venture to buy more than 30 U.S. properties in Ohio, Pennsylvania and New York. Homburg blamed his change of heart on “recent unprecedented financial events [that] have caused the virtual financial collapse of world capital markets.”
Surely, Richard Homburg would have something to say about what had been going on in the world.
He did. The financial system is crumbling, he complained. The banking system is in a mess because of debt. There will be at least two more years of down markets. But… But Homburg Invest was just fine, thank you very much.”Those things are happening to other people,” Cox paraphrases Homburg’s essential argument, “because they’re not as smart as me.”
The investment advisor was aghast. “The world had become a very scary place, but Homburg continued to wear these rose-coloured glasses when it came to his own company. And yet his own company was in exactly the same situation, and he had done nothing to protect it, reduce its debt load. He was always the ultimate salesman, the guy who always had an explanation whenever anything went wrong. The problem was the market stopped buying.”
Shortly after that, the investment advisor stopped recommending Homburg Invest to his clients. He wasn’t the only one.
By November 2011, when the Toronto Stock Exchange finally suspended trading in Homburg Invest, the company’s shares — which had traded as high as $70 a share in 2007 — were worth just 80 cents.
What had gone so wrong so quickly — and why?
***
Richard Homburg’s up-by-the-bootstraps tale, as he’s unfolded it in various interviews over the years, begins in the Netherlands in the aftermath of World War II. The first seminal event in young Richard’s life — his father’s death — happened when he was just four years old. His mother then married a man who didn’t have much hope for his stepson. He told Richard he’d be lucky to end up a garbage collector.
At first, that pessimistic prediction seemed about right. Richard dropped out of school at the age of 12 and began working as a drudge in a local bakery, hefting 50-kg sacks of flour. But he saved his guilders and, perhaps to prove to himself “my stepfather had no control over me,” he invested in his first piece of real estate even before he was of legal age.
By the time he was 20, he had established his own business, an import-export company he optimistically called Homburg International. “The idea,” he explained, “was that I was going to do it more than just in the Netherlands. I dreamed about going to Australia or Canada… I had my mind set that I was going to be successful; I had my mind set about what car I wanted to drive and all the things I wanted to do.”
In 1972 when he was still only 23, Homburg traveled to Nova Scotia to visit relatives. “There was a great beach,” he would recall years later. “I just had a great summer and kept hanging around.” He established a beach-head for his import-export business, then invested his profits in local real estate. At first, he bought low-rent units in Dartmouth’s poor north end but, by 1977, he’d also acquired a firm that built houses and apartments. He leveraged each new property to acquire more — and more prime — real estate. He swallowed up properties — residential, commercial, industrial, empty — in Alberta, British Columbia and the United States, as well as Nova Scotia. In 1991, he took control of Uni-Vest N.V., a publicly traded real estate fund in the Netherlands.
Ten years later, Homburg transformed himself into the chair and CEO of Homburg Invest — a new, publicly traded company incorporated in Alberta, headquartered in Halifax and listed on the Toronto Stock Exchange — in order to gain access to the cash he would need to fund his voracious global real estate appetite. “Unlike many real estate investment companies,” Homburg noted in his first annual report to shareholders, “we will not specialize in one specific type of real estate or one region of the country…. We have set ambitious goals for Homburg Invest Inc. but we believe they are realistic.”
Richard Homburg more than achieved even his most ambitious goals. From just 28 properties with a net value of $89 million in 2001, Homburg Invest’s growth exploded exponentially. In one six-week period in 2005, for example, Homburg Invest closed deals in the Netherlands and Germany worth $1.2 billion. By 2006, Homburg boasted the company had not only joined the “billion dollar club” but “we’re now focused on becoming a company with $8 billion in assets within five to seven years.”
Homburg’s universe did keep unfolding — and expanding — as he said it would. In 2007, the company bought Munich-based Infineon Technologies AG’s newly completed headquarters and business campus for $564 million; began developing 13 new properties in Calgary, including the $376-million Homburg-Harris commercial centre in the heart of downtown Calgary; announced plans to transform CN’s venerable Montreal train station and corporate office tower, which it had acquired for $370 million, into a “multi-use upscale” development; and forked over another $550 million to gobble up the assets of Montreal commercial landlord Alexis Nihon.
In 2007, the company’s year-over-year profit increased by 245 per cent — from $23 million in 2006 to $79.2 million.
By then, Homburg had acquired an $11.2-million corporate jet to ferry him between homes in the Netherlands and Nova Scotia, not to forget corporate offices and investment interests everywhere.
Though the company had become publicly traded, the company was really Richard Homburg. It reflected his passions and quirks. Since Homburg speaks Dutch, German and English, he insisted employees at his foreign holdings had to be multilingual too. After he almost died as the result of an illness, Homburg became a fitness fanatic, installing a gym in the office and pushing his own employees to be more fit.
Homburg also established himself as a major Maritime philanthropist, most notably donating $5 million to Saint Mary’s University in Halifax for construction of the Homburg Centre for Health and Wellness.
And somewhere along the line, he grew to like watches so much he bought a Chinese watch-making company. According to the company’s web site, Homburg “is one of the keenest collectors of exclusive watches with mechanical movements. He loves classical mopeds as well,” the website adds whimsically, but that is quite another story.
Indeed.
And then... the bottom fell out.
“Homburg’s growth plan worked so long as property values increased,” explains the investment advisor. “But he was so highly leveraged that once the markets turned, it became a house of cards.”
“Richard,” sums up Kevin Cox, “lost his magic touch.”
***
Homburg Invest’s slippery downward slide was lightning-greased by global events over which Homburg had no control. His was far from the only company to go bust after over-borrowing during the heady global real estate boom. But there were other factors at play too. And most of them had to do with Richard Homburg. He had “put his name on the door,” as one investor described it to me, and that made him the personification — for good and ill — of his company.
“If you’re a private company you can be low profile,” Homburg once mused. “It’s between you, the tax department and how you feel when you look at yourself in the morning.”
As a publicly traded company, however, there were inevitable, pesky questions about how Homburg — who effectively owned 46 per cent of Homburg Invest and controlled 72.5 per cent of its shares — actually ran the company.
In one prospectus, for example, Homburg Invest says it paid $52.5 million in 2006 to a variety of companies personally controlled by Richard Homburg in return for close to a dozen different “services,” including asset and construction management, property management, even insurance. In 2010, when Homburg Invest decided to roll its Canadian assets into a real estate investment trust, the company agreed to pay Homburg Canada—another Homburg-controlled company— $21.6 million in “termination fees” in addition to the $47 million it had paid for management services the year before. As one investment advisor deadpanned at the time: it was “a move that will raise some eyebrows.”
Although those related transactions were described in company documents, Cox, who regularly examined such corporate governance documents, confesses “Homburg’s spider web was the only one I could never penetrate.” Homburg wasn’t much help. No one but Richard Homburg was allowed to speak for the company and, when he did grant interviews, “they were more of an audience. He expected to be treated with a certain amount of deference.”
“He would have been a brilliant politician,” adds the investment advisor, who also found the Homburg network of inter-related companies impenetrable. “You’d ask a question he didn’t want to answer and he’d talk and talk, go off on five different tangents but he’d never answer your question.”
While no one seemed to fret too much about this lack of transparency when the company was flying high, the questions became more pointed after the company’s fortunes began to crumble.
In April 2010, the Dutch Authority for Financial Markets, a regulatory agency, formally ordered Homburg Invest to provide it with more information regarding a murky tax dispute between Richard Homburg and Dutch authorities.
What was that all about? No one knows for certain, even now, although Cox believes it may have had at least something to do with Homburg’s personal style. “Richard doesn’t take regulatory people seriously. Regulators worry about ‘i’s’ and ‘t’s.’ Richard thinks on a big scale.”
Homburg also clearly still continued to think “big” when it came to his company’s future — even after its future seemed all in its past.
“Homburg hammered in ‘08,” screamed a Halifax Herald headline over a report on Homburg’s $96 million loss in 2008. Four months later, Homburg had to tell shareholders — whose once-$70 shares were now worth less than $10 — they would receive no dividend that year. The next year, share values plummeted another four dollars.
Despite all that, Homburg suggested, Pollyanna-like, to one unhappy investor at the company’s 2010 annual meeting that she buy even more Homburg stock now that it was cheaper.
In the midst of all this corporate turmoil, Homburg also continued to play his larger-than-life role as generous philanthropist. In July 2009, he announced he was personally donating $2 million to Charlottetown’s Fathers of Confederation Building Trust — in part to build a pedway to link the Confederation Centre of the Arts to his new downtown hotel project but also to get his name over the entrance to the centre’s iconic mainstage, where Anne of Green Gables has delighted audiences for generations.
Homburg’s corporate stage management didn’t go nearly as well. In June 2009, he announced plans to restructure the company by spinning off its real estate assets into five new entities, including Homburg Canada Real Estate Investment Trust, which Homburg would describe as “one of Canada’s largest and best quality” REITs.
While selling Homburg Invest assets to the REIT did help reduce its crushing debt, it also, in the process, hived off many of the company’s best property assets, making Homburg Invest itself an even less attractive investment.
In March 2011 — just a month before the Dutch financial regulator, who’d been raising corporate governance alarms for a year, formally ordered Homburg Invest to remove its boss and largest shareholder as a company “decision-maker” — Homburg preemptively announced he would be stepping down as chair and CEO to “focus on a privately-owned global real estate venture.”
A month later, Homburg unexpectedly offered to buy up all the outstanding shares in Homburg Invest and take it private, a ploy that would have put it, and Homburg himself, beyond the clutches of Dutch regulators.
But that plan quickly died when key investors, including Clearwater’s John Risley, dismissed the $3.25 a share offer as “way too low” and raised pointed questions about the company’s lack of transparency.
After that, what had become a tangled mess got even more so. Relations between Homburg and those he’d put in charge when he left deteriorated. There were accusations and counter-accusations, lawsuits, name changes (Homburg Canada REIT became Camarc REIT in order to “put some distance between itself and troubled Homburg Invest,” and then was promptly taken over by a competitor).
Finally, on September 9, 2011, a battered Homburg Invest, no longer on good terms with its major shareholder, applied for creditor protection in order to try to restructure. It made the move, in part, to “address the primary concerns” of the Netherlands Authority for Financial Markets, which was threatening to revoke the company’s investment licence. It eventually did so anyway.
By October, the company’s court-appointed monitor reported Homburg Invest had debts of $2 billion. Its assets, which had topped $600 million at the end of 2008, were now worth just $57 million. By that point, the Toronto Stock Exchange had already halted trading in shares of Homburg Invest and initiated a review to determine if the stock should be de-listed.
The rapid rise and faster fall of Richard Homburg seemed complete.
It was over… Or is it?
***
The qualities that brought Richard Homburg to the top of his entrepreneurial game — vaulting ambition, obsessive passion, massive ego and the kind of pride that goes before a fall — are also, of course, what brought him crashing to earth. They are, in fact, the essential qualities of any successful entrepreneur.
Richard Homburg is still only in his early sixties. He’s not without assets. In early January, a Montreal court approved the terms of a deal to settle a lawsuit between Homburg Invest and its former CEO that gives Richard Homburg $10.5 million in cash, $7.1 million in promissory notes and title to two condos valued at $3.1 million. No one believes he’ll end up in a food bank anytime soon — and his wounded ego will almost certainly ache for vindication.
When I ask the investment advisor whether Homburg can make a comeback, he is initially dismissive. “He’s essentially done,” he says. “The whole thing has become too much of a soap opera.” But then he pauses, considers. “Richard has always worn those rose-coloured glasses. He’ll probably look at this and say, this is just the way the world works. Shit happens. And he’ll move on. Who knows?”
The little Dutch boy, who used the ache of a dismissive step-father to stoke his overweening ambitions, has not disappeared.
We may not have heard the last of Richard Homburg.
___
A note on sources:
Since Richard Homburg didn’t respond to my requests for an interview, I’ve had to draw on other sources for this article. Most of the biographical information about him originally appeared in two excellent profiles, one by Canadian Press reporter Michael Tutton, the other in the defunct Halifax Daily News, both published at the pinnacle of Homburg’s success. The best day-to-day coverage of Homburg’s corporate comings and goings appeared on the Halifax-based website allnovascotia.com. And, of course, I talked extensively with people who know Homburg and his companies intimately: associates, investors, investment advisors and developers, none of whom would be quoted directly in the article.
Copyright 2012 Stephen Kimber
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About
STEPHEN KIMBER, a Professor of Journalism at the University of King's College in Halifax, is an award-winning writer, editor and broadcaster. He is the author of one novel -- Reparations -- and seven non-fiction books.
Buy his books at Amazon.